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Is Lavoro Limited (LVRO) the Best Fertilizer Stock to Buy?
Ali Ahmed
5 min read
We recently compiled a list of the 8 Best Fertilizer Stocks To Buy Now.In this article, we are going to take a look at where Lavoro Limited (NASDAQ:LVRO) stands against the other fertilizer stocks.
An Overview of the Fertilizer Industry
The fertilizer industry is a crucial sector in agriculture that focuses on the production and distribution of substances that enhance plant growth. By supplying necessary nutrients, fertilizers help improve crop yields and quality, which are essential for feeding the growing global population.
The industry has evolved significantly over time, with modern practices relying heavily on chemically manufactured fertilizers to support large-scale farming and meet the global demand for food. According to Mordor Intelligence, the global fertilizer market is estimated to have reached a value of $381.7 billion in 2024. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 5.99% during 2024-2030 to reach $541.2 billion by the end of the forecast period.
There is a strong sense of optimism within the industry. The Fertilizer Institute’s 2023 Industry Trends Survey highlighted a positive outlook within the fertilizer sector, with many respondents expressing confidence in future growth. About 40% of those surveyed believe that market conditions have improved over the past five years, despite challenges like the COVID-19 pandemic and supply chain disruptions. Companies attribute their resilience to strategic practices such as precommitment purchases and careful planning. Nearly 80% of participants are optimistic about their businesses being equally or more profitable in the next five years.
The fertilizer industry is currently experiencing several key trends that are shaping its future. Advances in technology are transforming how fertilizers are produced and applied. Innovations such as precision agriculture, which uses data analytics and sensors, help farmers optimize fertilizer usage based on specific soil conditions and crop needs.
Additionally, there is a growing demand for fertilizers that offer more nutrients while reducing their environmental impact. The emphasis on maximizing the efficiency of fertilizer application to promote sustainable farming practices is increasing, which is driving the development of new and innovative solutions.
On August 13, CNBC reported that Windfall Bio, a California-based startup, is addressing methane emissions using "mems," or methane-eating microbes. These microbes naturally consume methane and convert it into fertilizer. This innovative approach helps reduce harmful methane from sources like agriculture, landfills, and oil production. Farmers can use the fertilizer produced, while companies generating waste methane can sell it back to Windfall, creating a new revenue stream.
These trends indicate a dynamic shift in the fertilizer industry, balancing the need for increased food production with environmental sustainability and innovation.
Methodology
To compile our list of the 8 best fertilizer stocks to buy now, we used the Finviz and Yahoo stock screeners to find the largest fertilizer companies. We also reviewed our own rankings and consulted various online resources to compile a list of the best fertilizer stocks.
We carefully verified our list to remove any companies that can not be classified as fertilizer stocks. From an initial pool of over 15 fertilizer stocks, we focused on the stocks that analysts believe possess the greatest potential for growth. Finally, we ranked the 8 best fertilizer stocks to buy now based on their average price target upside potential according to analysts, as of November 18, 2024.
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A farmer tending to his crops, demonstrating the products of the agricultural inputs retailer.
Average Upside Potential According to Analysts: 17.88%
Lavoro Limited (NASDAQ:LVRO) is Brazil’s largest agricultural input retailer and a leading provider of biological inputs. The company operates in Brazil, Colombia, and Uruguay, offering a comprehensive portfolio that empowers farmers to adopt innovative solutions and enhance productivity. Lavoro Limited’s (NASDAQ:LVRO) Crop Care business segment is a vertically integrated producer of specialty fertilizers, crop protection products, and proprietary biological crop inputs.
The company's strategy includes a strong focus on mergers and acquisitions. Since its inception in 2017, Lavoro Limited (NASDAQ:LVRO) has completed 24 acquisitions, quickly becoming a leader in agricultural input distribution in Brazil and Colombia. The company is also focused on strengthening its own brands of agrochemicals, foliar, fertilizers, and biological products.
In its fiscal fourth quarter of 2024, which ended on June 30, 2024, Lavoro Limited (NASDAQ:LVRO) reported a revenue of $1.89 billion, a 5% increase from the previous year. This growth was driven by market share gains and increased sales volumes, despite facing significant challenges in the Brazilian agribusiness sector, where the agricultural inputs retail market declined. The Crop Care segment stood out with a remarkable revenue increase of 24%, reaching $150.7 million for FY2024, and a gross profit of $56.1 million.
In Q4 2024 alone, Lavoro Limited’s (NASDAQ:LVRO) Crop Care revenue surged by 87% year-over-year to $19.9 million. This growth was primarily fueled by strong performance in specialty fertilizers and crop protection products.
LVRO ranks among the best fertilizer stocks to buy. Despite the challenging environment, the company’s ability to gain market share and improve its financial performance highlights its resilience. Lavoro Limited (NASDAQ:LVRO) presents an attractive opportunity for investors looking to buy into a growing fertilizer stock with significant potential for future growth.
Overall LVRO ranks 6th on our list of the best fertilizer stocks to buy. While we acknowledge the potential of LVRO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LVRO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
